Chiquita Adds Bagged Salads to the Bunch

Chiquita Brands International Inc., a leading producer of bananas and fresh-cut fruit, announced Wednesday that it was buying Salinas, Calif.-based Fresh Express, the nation’s top seller of bagged salads, from Performance Food Group Co. for $855 million in cash.

The announcement came a day after Chiquita reported that its profit had more than tripled in the fourth quarter.

Performance Food shares climbed $2, or 8%, to close at $27 in Nasdaq trading Wednesday, while Chiquita shares rose 5 cents to close at $22.05 on the New York Stock Exchange. In the last year, Chiquita’s shares have ranged from $15.56 to $23.09, while Performance Food shares have traded in a range of $20.99 and $35.94.

The move would help Chiquita with its goal of reducing reliance on bananas, especially in Europe, where the company says limits on banana imports have hurt its ability to compete.

“I believe this is the most important strategic and transformational move the company has made in decades,” said Fernando Aguirre, Chiquita’s chairman and chief executive.

Fresh Express has a 40% share of the bagged-salad market and about $1 billion in annual revenue. Chiquita estimates the fresh-cut salad market at $2.7 billion a year and growing, as consumers more frequently buy prewashed and prepackaged salads.

Chiquita said the acquisition would make it the leader in the value-added salads category.

Chiquita also would gain access to Fresh Express’ restaurant customers, including McDonald’s Corp. and Yum Brands Inc.’s Taco Bell and KFC chains, Aquirre said.

Performance Food, based in Richmond, Va., said it would concentrate on its Broadline and Customized food-service distribution businesses.

Performance Food is the nation’s No. 3 so-called broadline food-service distributor, behind Sysco Corp. and U.S. Foodservice Inc. The company distributes food and other products to more than 48,000 businesses, including hotels, cafeterias, schools and restaurants such as Ruby Tuesday and Outback Steakhouse.

Performance Food had $5.5 billion in sales in 2003, the most recent year available.

The deal is expected to close in the second quarter, and Chiquita hopes to keep the management of Fresh Express.

Banana sales account for 56% of Chiquita’s revenue, but that would drop to 42% after the Fresh Express acquisition, Aguirre said.

“Of course, bananas will continue to be our signature product. But by this transaction, we continue to reduce our reliance on a single product and a single region,” Aguirre told analysts during a conference call.

Cincinnati-based Chiquita generates about 72% of its revenue in Europe. With Fresh Express, it would make 55% of its revenue in Europe and 45% in North America.

Salads would account for about 20% of Chiquita’s sales.

Fresh Express is a wholly owned subsidiary of Performance Food Group. Fresh Express would remain based in Salinas.

Chiquita estimates that it would save about $20 million a year by consolidating facilities and through other cost-saving measures.

Chiquita said Tuesday that it earned $25 million, or 61 cents a share, in the quarter ended Dec. 31, compared with $8 million, or 19 cents a share, in the same period a year earlier. Sales rose 12% to $768 million from $686 million in the fourth quarter of 2003.